Moody's cuts ratings for Chicago schools, park district

Credit ratings for Chicago's public schools and parks took a hit late yesterday, dragged down by the city's rating drop earlier this month.

Given their close ties to the city of Chicago and a tax base that's large but stretched thin by the overlapping debt and pension obligations of the city and other governmental entities, Moody's Investors Service said its outlook remains negative for both the Chicago Board of Education and the Chicago Park District.

The Wall Street credit rating agency reduced the Chicago Board of Education one notch to Baa1 from A3, the same downgrade the city got March 4. The rating applies to $6.3 billion in outstanding school-related general obligation debt.

The Chicago Park District's credit rating was lowered two notches, to A3 from A1, on $826 million in outstanding debt.

Although the park district has strong financial operations, ample reserves and manageable debt and recently enacted pension liability reductions, Moody's said that “given the nature of the park district's mission and the extreme pressures facing the city, we believe (the park district's) financial operations and position could be indirectly affected through city officials' influence on, for example, cost allocations and levy setting.”

Moody's estimates the board of education will have to draw on $562 million in reserves in fiscal 2014 to meet a $404 million increase in pension payments and balance its budget. The shortfall for 2015 is projected to reach $900 million.